25/7/06 (NSTP)  - BEIJING: China, which is Malaysia's top palm oil buyer, is mulling building its first-ever palm oil-based biodiesel plant to reduce its dependency on expensive fossil fuel.

The plant, which will have an annual capacity of 100,000 tonnes, could be located either in Malaysia or China. It costs an estimated RM40 million to build a 60,000-tonne biodiesel plant in Malaysia.

State-owned China National Offshore Oil Corp president Fu Chengyu said the company is studying various aspects of the venture, including economies of scale, consistent raw supply, technological aspects and its commercial viability in the next 20 to 30 years.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said as Malaysia's top palm oil buyer it is a natural progression for the superpower to set up the plant.

"We have received many applications to set up biodiesel plants from South Korea, Japan and Europe, but not a single application yet from China. So, we welcome any application from Beijing," Chin told reporters here. He is leading a 30-member palm oil trade mission which ends on Friday.

Chin was visiting Fu at the petroleum company's headquarters, which is China's third largest oil company producing some 300 million barrels per year.

Chin said the recent announcement by Energy Water and Communications Minister Datuk Seri Dr Lim Keng Yaik on the freezing of new biodiesel licences is only temporary and will not affect any possible application by Beijing.

"Furthermore, out of the 98 applications, not all will get the licence because some of the applications involve small volumes at below 10,000 tonnes, which is too small," he said.

Meanwhile, Biosweet Sdn Bhd managing director A.K. Low said China is also planning to build two more palm oil-based biodiesel plants in Shanghai and Guangzhou, which could be up and running in 12 months.

China, which consumes 1 billion tonnes of diesel per year, plans to build up to 100 biodiesel plants as an alternative to spiralling crude oil prices. But these biodiesel plants could also use rapeseed oil or soyabean oil as its feedstock.

China bought one fifth of Malaysia's palm oil products which totalled 13.45 million tonnes last year worth RM28.56 billion exported to over 140 countries.